China's National Champions: The Evolution of a National Industrial Policy—Or a New Era of Economic Protectionism?

In this article we ask a series of related research questions concerning China's recent industrial policies, particularly the 10th and 11th five‐year economic policy plans. Our questions go to the nature of China's long‐term competitiveness of its national champions, and to what extent Chinese government policies are evolving to domestic protectionism that adversely affects foreign invested enterprises' (FIEs) competitive position in the Chinese economy. We thus evaluate the nature of the five‐year economic policy plans, their adverse impact on FIEs operating in China, and the rise of designated Chinese national champions (in the 11th five‐year economic policy plan) to compete with major FIEs on a global scale. However, we suggest that the role of the Chinese government's recent industrial policy, when compared to Michael Porter's “Diamond of National Competitive Advantage” recommended government policy approaches, may not augur well in the long‐term for China's national champions. © 2013 Wiley Periodicals, Inc.     

The Rise of China and East Asian Export Performance: Is the Crowding‐Out Fear Warranted?

This paper examines how China's emergence as a major trading nation is affecting export performance of its East Asian neighbours. Following a stage‐setting overview of trends and patterns of China's export performance, it probes China competition in third country markets and emerging patterns of imports. The East Asian export experience is examined in a wider global context against the backdrop of the ongoing process of global production sharing. The findings indicate that the ‘China threat’ has been vastly exaggerated in the contemporary policy debate. China's rapid market penetration in traditional labour‐intensive manufactured goods has occurred mostly at the expense of the high‐wage East Asian countries, without crowding‐out the export opportunities of low‐wage countries in the region. More importantly, China's rapid integration into global production networks as a major assembly centre has created new opportunities for the other East Asian countries to engage in various segments of the value chain in line with their comparative advantage.     

The Gravity of China's African Export Promise

Africa's largest trade partner, China, criticised for exchanging resources for manufactures, has promised to increase imports and optimise the structure of trade with Africa. Using a gravity model of China's imports for the years 1995–2009, we explore potential dynamics for this promise, uniquely accounting for market economy recognition and Taiwan recognition. The former is associated with increased imports, while the latter effect is ambiguous and statistically insignificant. Comparison of projected against actual imports across three growth‐path‐aligned economic geography typologies – resource‐rich; landlocked and resource‐poor; coastal and resource‐poor – sets out China's imports trends in an abstract framework of African export potential. We find not only ‘under’ importing across a majority of resource‐poor countries. We also find that current trade policy is the least applicable to these comparatively poor exporters’ trade with China. If the latter are to serve a broader catalytic role in Africa's regional industrial transformation as compared to the role of coastal and resource‐poor countries in regional economic transformation in Asia and Latin America, China–Africa trade and investment policies may need additional thinking.     

China's foreign trade marketing strategy: Problems and prospects 1

It has been seven years since the open door policy was officially instituted by the People's Republic of China. During this time, changes have taken place within Chinese society and China's dealings with the rest of the world. In this paper, the authors evaluate the problems and prospects for China's foreign trade marketing strategy. They make recommendations in five policy areas: (1) export promotion; (2) the mix of exports; (3) a systems approach to trade; (4) joint ventures stressing value‐added labour and (5) the role of assembly technology. Each strategy is identified and discussed in terms of its future prospects in the development of China's trade.     

Is fiscal revenue concentration ratio in China too high?

This paper challenges the viewpoint that fiscal revenue concentration ratio in China is too high. First, this paper estimates China's nominal and real fiscal revenue concentration ratios at both budgetary and full‐calibre levels, and makes an international comparison using all available data of the IMF's GFS database for both developed and developing countries, revealing five stylised facts that expresses serious doubts about the statement that fiscal revenue concentration ratio in China is too high. Second, the paper proposes four indicators to measure asymmetric degree of China's central fiscal revenue concentration ratio and expenditure concentration ratio to identify whether fiscal revenue concentration ratio in China is too high. The results show that: (i) central fiscal revenue concentration ratio is lower and (ii) compared with asymmetric degree of China's central budgetary fiscal revenue concentration ratio and expenditure concentration ratio, asymmetric degree of China's central full‐calibre fiscal revenue concentration ratio and expenditure concentration ratio is more serious, indicating that the central full‐calibre revenue concentration ratio is much lower. Therefore, this paper not only disproves the view that China's fiscal revenue concentration ratio is too high, but also shows that China's fiscal revenue concentration ratio, especially at a full‐calibre level, is much lower. Further international comparison shows that asymmetric degree of China's central fiscal revenue concentration ratio and expenditure concentration ratio is ranked third in the world, and Chinese central government has the lowest ability to undertake full‐calibre fiscal expenditure among the world's countries. Finally, following the State Council's guidance on properly increasing central authority, the paper argues that it is necessary for the central government to improve central fiscal revenue concentration ratio, especially at the full‐calibre level.     

The Business(es) of the Chinese State

The state industrial sector is the Achilles heel of China's otherwise remarkable economic performance over the past two decades. Most other countries in transition from socialism have transformed SOEs into commercial entities through systematic, market‐driven restructuring and privatisation to become more efficient and competitive. In China, a series of innovative, if often administrative, insitutional reforms since 1978 have begun to achieve the Chinese authorities' goal of ‘separating governemtn from business.’ But the Chinese State still maintains ownership of key enterprises, and government agencies carry out shareholder functions typically performed by private owners in a market economy. Although privatisation and restructuring of SOEs is occurring, it mostly pertains to small and medium sized firms. For the principal businesses, by contrast, the creation of large state enterprise groups and holding companies (and experiments in other forms of ‘state asset management’) have become the main form of restructuring. Today, China's SOEs still account for more than one‐quarter of national production, two‐thirds of total assets, more than half of urban employment and almost three‐quarters of investment. While direct budgetary subsidies have declined, explicit and implicit subsidies are still making their way to prop up loss‐making SOEs through the financial system and other routes. At the same time, SOEs are still producing non‐marketable products, resulting in a sizeable inventory overhang. These inefficiencies and distortions represent a drain on the country's resources and thus present a challenge to the Chinese leadership for reform. This paper sheds light on these challenges by analysing the incentives and constraints on China's SOE reform programme. Four critical aspects of the reforms are highlighted and evaluated against the backdrop of international experience: clarification of property rights; establishment of large group/holding companies and other new organisational structures; improved corporate governance incentives; and implementation of international financial accounting and auditing practices. The paper concludes with policy recommendations.     

Globalisation and Industrial Policy: The Case of China

After a quarter of a century of industrial policy, China's objective of nurturing a group of globally competitive state‐owned enterprises appears to have succeeded beyond most expectations. However, China's SOEs are far from catching up with the world's leading firms. Protection through state ownership in a massive, fast‐growing economy has permitted China's SOEs to earn large profits and achieve high market capitalisations, but this is not the same thing as building globally competitive firms. The fact that China's industrial policy has been unsuccessful after a quarter of a century of intense effort demonstrates how difficult it is to construct an industrial policy in the era of capitalist globalisation, which has produced intense global industrial concentration across large parts of the global value chain. Although the detailed content of the next stage of reform of China's large state‐owned enterprises is unclear, China's determination to build a group of globally competitive large companies remains undimmed.     

China and the Trans‐Pacific Partnership: A Numerical Simulation Assessment of the Effects Involved

The Trans‐Pacific Partnership (TPP) is a new negotiation on cross‐border liberalisation of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on China and also China's inclusion or exclusion on other countries. We use a numerical 11‐country global general equilibrium model with trade costs and inside money. Trade costs are calculated using a method based on gravity equations. TPP barriers potentially removable are trade costs less tariffs. Simulation results reveal that China will be slightly hurt by TPP initiatives in welfare when China is out, but the total production and export will be increased. Other non‐TPP countries will be mostly hurt in welfare, but member countries will mostly gain. If China takes part in TPP, she will significantly gain and increase other TPP countries' gain as well. The comparison of TPP effects and global free trade effects show that the positive effects of global free trade are stronger than TPP effects. Japan's joining TPP would be beneficial to both herself and most of other TPP countries, but which negative effects on China's welfare when out of TPP will increase further.     

Globalization of R&D and China: An Introduction

In this introduction, we discuss the recent changes in multinational corporations' (MNCs) research and development (R&D) strategies and China's rising role in this new development. Significant changes include: 1) More and more corporations have started overseas R & D operations; 2) the missions of many overseas R&D facilities have shifted from the traditional supplementing and supporting roles to become critical and strategic components of MNCs' global R&D networks; and 3) MNC overseas R&D operations have expanded their geographic reach to carefully selected developing countries. China has benefited from such changes and has become one major attraction for such R&D facilities due to its rich endowment of low-cost and well- trained scientists and engineers as well as its fast growing domestic market and burgeoning foreign investment in manufacturing. The explosion of foreign R&D investment has also been accompanied by the rapid growth of China's domestic investment in R&D. The growth in both domestic and foreign investment in R&D implies that China will improve its position in global economic and technological competition. However, it is unclear to the rest of the world about the implications of China's rising R&D and whether or not China can capture the value from the presence of foreign R&D centres. We conclude that issues related to China's science and technology development in general and foreign R&D in China in particular warrant more research in the future.     

China and the WTO: The implications of membership in historical context

China's accession to the WTO can be seen as the culmination of not just a 15‐year negotiation but also of a process that actually began 150 years ago with the projection of Western imperialist power into the Chinese mainland. China now appears to have joined the global community on mutually agreeable terms. The commitments China has made are significant and, if implemented, will facilitate continued change in the nation's legal/regulatory structure for economic growth. WTO accession has many implications, both economic and political, for China and the rest of the world; it is important not to forget historical context and current realities in assessing them. © 2003 Wiley Periodicals, Inc.     

The Eurasian Landbridge and China's Belt and Road Initiative: Demand,supply of services and public policy

Rail links between China and Europe are typically analysed in the context of China's Belt and Road Initiative, focusing on China's economic rise and the implications for international relations. This paper argues that establishment of the China–Europe Landbridge predated the BRI and has been market‐driven, as service providers identified and responded to demand for efficient freight services along pre‐existing railway lines. Governments' role was trade facilitating, that is reducing delays and costs at border‐crossing points, rather than investing in hard infrastructure. Service providers responded by linking European and Asian value chains (e.g., in automobiles and electronic goods) and reducing costs for traders shipping between China and Europe. The Eurasian Landbridge provides a case study of servicification as a component of increased trade in the twenty‐first century.     

Can Africa compete with China in manufacturing? The role of relative unit labour costs

This paper examines sub‐Saharan Africa's (SSA ) bilateral trade and cost competitiveness with China. We document an extraordinary imbalance in the structure of bilateral trade in that China overwhelmingly exports manufactured products to SSA and almost exclusively imports primary products in return. Our principal means of assessing the competitiveness of SSA 's manufacturing sector vis‐à‐vis China are measures of relative unit labour costs (RULC ). We find that African RULC s declined over the 2000s as China's wages rose faster than Chinese productivity while the reverse was true for the SSA countries in our sample. Nevertheless, RULC s vis‐à‐vis China remain very high for many SSA countries. High RULC s along with weaknesses in the business climate suggest that most SSA countries are unlikely to be competitive in labour‐intensive manufacturing any time soon.     

Intensive and extensive margins of exports: What can India learn from China?

We decompose India's export performance in manufactured products during 2000–15 into changes at the intensive and extensive margins. India's performance, along different margins, is compared and contrasted with that of China. The results show that while China outperforms India at both the margins, the gap is particularly wide at the intensive margin. Decomposition of intensive margin along quantity and price margins shows that Chinese products are generally sold cheaper than Indian products. Higher price margin, however, has not translated into high intensive margin for India due to its abysmally low quantity margin. We examine different explanations for China's superior performance relative to India, along different margins, using a gravity model. Our results suggest that China's exchange rate policy was not the prime reason for its export success. Neither do we find that FDI inflows were significant in explaining the export performance gap between them. The results show that China's export relationship bias towards high‐income partner countries holds the key in understanding its superior performance. This bias is a natural consequence of China's high degree of specialization in labor‐intensive activities. India, by contrast, due to an idiosyncratic pattern of specialisation, has failed to exploit its export potential in high income countries.     

Empirical evidence on surrogate country method for non‐market economy: US anti‐dumping policy towards China

Whether the non‐market economy (NME) treatment on China can be maintained even after the expiry date under Section 15 of China's World Trade Organization (WTO) Accession Protocol is one of the most controversial issues in the WTO. In fact, the key issue of the NME status in the anti‐dumping (AD) proceedings turns out to be how surrogate countries are selected in relation to dumping margin calculation. This paper reviews the US practices concerning the application of the surrogate country method. Despite the general perception of capricious and random selection of surrogate countries, the Department of Commerce has maintained a consistent pattern for applying the criteria. This seemingly consistent practice, however, raised systematic problems—but not at a significant scale—in dumping margin calculation concerning Chinese products. This result sheds an interesting light on the current WTO disputes concerning the China's NME status. At least in terms of the US AD practices, the result of the WTO dispute settlement process may not have a significant impact on the China's exportation.     

Emerging economies and the global financial crisis: Evidence from China and India

The global financial crisis (GFC) spread from the US and the EU economies to the developing world. In this article, we seek to gain a better understanding of clear contexts, attendant mechanisms, and processes associated with the GFC in China and India. We identify and synthesize the available evidence on the size of the external shock, the cushioning effects, and responses associated with the GFC to propose a framework that enables us to analyze more deeply the antecedents and consequences of the GFC in these two economies. Because of differences in their economic, social, and political backgrounds, China and India have exhibited noteworthy differences in the impacts and responses to the GFC. The findings indicated that trade and investment linkages with the outside world and the degree of personal globalization affected the size of the external shock associated with the GFC. In China's case, a sound macroeconomic policy framework and the state's control on the economy provided a cushion effect, which acted as a buffer to protect the economy against the external shock. China's and India's responses to the GFC included a shift from export‐driven to domestic demand‐led growth and diversion and shift of economic links away from economies associated with the GFC. © 2011 Wiley Periodicals, Inc.     

Rapid rise of China's semiconductor industry: What are the implications for Singapore?

Lately, there has been a rush of foreign investment commitments in China's semiconductor industry, giving rise to predictions of a semiconductor revolution in the world's most populous country. Pull factors include China's entry into the World Trade Organization (WTO), which would clarify trading and investment rules, government incentives, and, of course, burgeoning domestic demand. For the moment, because of U.S. export restrictions, China's chip industry will be kept behind the technology curve by around five years. However, its ample supply of engineers and low labor costs will aid in the development of the assembly & test and design sectors, which are labor‐intensive. But given strong government commitment, the industry is likely to continue to progress upward, gaining from the diffusion of high‐tech know‐how through its alliances with multinational corporations and tier‐one foundries. In the industry's value chain, there is potential for Taiwan and China to complement each other in both domestic and global markets, across both high‐ and low‐end technology segments, and across the entire chain of activities. To meet the challenges, Singapore needs to further leverage on its competencies in infrastructure and logistics, as well as the well‐established ASEAN production network for greater economies of scale. For Singapore's semiconductor industry to remain competitive, there is a need to strengthen the full value chain, from integrated circuit (IC) design to wafer fabrication to packaging & test, by attracting and building up companies specializing in different competencies. Singapore semiconductor manufacturers should continuously strive to stay at the technology forefront and provide competitive customer services. © 2004 Wiley Periodicals, Inc.     

China and the Climate Change Debate

In the lead‐up to the 2009 climate change discussions in Copenhagen, the role of China began to take center stage. It had just become the world's largest emitter of carbon emissions, and it was taking the lead to represent developing nations at the talks. It was a coming‐out party for China that elevated its role to a position of significant responsibility, at a time when China really was not capable of meeting the obligations they themselves set out. While China's internal focus may be seen externally as stymieing a global effort, it may be exactly what the world needs. A practical approach to fixing “local” problems that in turn recalibrates the very systems that are constantly stalled at the global levels from the bottom up. © 2014 Wiley Periodicals, Inc.     

From four hundred million to more than one billion consumers: a brief history of the foreign advertising industry in China

As an industry and a form of mass communication, modern advertising was introduced in China from the West at the turn of the century. The 1920s and 1930s witnessed China's first major exposure to foreign advertising and consumer culture. The 1990s may prove to be China's second encounter with global consumer culture through the medium of advertising; only this time, its experience is more massive and far-reaching. This article provides a capsule history of the development of the foreign advertising industry in China within the context of Chinese economy and media.     

From mercantile strategy to domestic demand stimulation: changes in China's solar PV subsidies

Through scrutinizing China's industrial subsidies towards its solar photovoltaic (PV) sector from a theoretical perspective constructed by Michael Porter on the government's role in forging national comparative advantages, this study tries to capture recent dynamics in China's state capitalism, which has been evolving from a mercantile stage in which most subsidies were designed to influence factor conditions and supporting industries, to a new stage of domestic demand with more subsidies aimed at reshaping domestic demand conditions to absorb redundant manufacture capacity. China has emerged as the world's largest solar panel producer, but compared to its fast-expanding wind power market that has congenital advantages in attracting policy support, China's domestic solar PV market has been underdeveloped and failed to absorb a large part of its inflated production capacity. Empirical evidences have shown that in sync with the state's recent policy shift to domestic demand from export-orientated mercantile strategy, the government's role in supporting the solar PV industry has been transforming from subsidizing the production side to subsiding the demand side. As solar PV power generation is approaching the breaking point of grid parity with existing subsidies and feed-in tariffs, China could witness its PV installed capacity grow exponentially in the near future.